It’s time to Review your 401(k)

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A 401(k) plan is, for many people in the United States, the very keystone of their retirement plan. Now more than ever, especially due to the fact that defined benefit plans are disappearing, many Americans have the responsibility of making their own decisions about their finances and, in most cases, doing so with very little professional assistance. These decisions are vitally important and can make or break a person’s retirement plans.

The bad news (worse news?) Is that a recent study has shown that the average 65-year-old has a 401(k) that equals about $25,000, barely enough to maintain a young, healthy person’s lifestyle let alone an older person who is leaving the workforce for good. Another problem is the fact that most people don’t review the selections that their plan gives them or don’t reallocate their portfolio, something that can lead to long-term holdings that don’t jive with their risk tolerance and time horizon. Unfortunately, even when they have excellent tools available, most people don’t take advantage of them.

Every company has what they call an “advisor of record” on their staff when they have a 401(k) plan. This person has a fiduciary responsibility to help investors by offering them a diversified mix of securities as well as a high level of advice. Unfortunately this advice is usually not continuous and not as high a level as necessary and many workers are left with a 401(k) plan that is unattended and doesn’t grow nearly as well as it could.

Now for a little good news. (Finally.) A number of independent provider firms are starting to spring up that offer ongoing money management of 401K plans in many businesses. In most cases these firms don’t need the input of the employee to move their funds outside of their particular plan and don’t subject the plan holder to taxable consequences.

Many of these firms offer online tools to investors or give them the ability to get advice from professional third-party managers, people who can not only choose investments wisely but also rebalance their portfolio or help the 401(k) holder to do it themselves. These tools can help someone to analyze their 401(k)s performance, manage their track records and expenses and help them with selecting the best choices. They can also be used to analyze choices and select the proper asset allocations, as well as help them procure services that will help them to create a personalized retirement plan and put that plan’s strategy into action.

It should be noted that most of these firms act as independent providers, are not paid by investment companies and give their subscribers access to competent financial advisors. It’s then up to the investor to do their due diligence and investigate all of the various online tools that are available and manage what they have already saved.

The simple fact is that the stakes these days have never been higher for retirees. When it comes to getting the maximum out of your 401(k) plan the most important thing you can do is manage it well and, if you can’t, find someone that can. Don’t assume that just because your company is offering it to you that they are running it correctly and ask questions, do research and make sure that your nest egg isn’t falling out of the tree.